Release Date: December 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Victrex PLC (VTXPF, Financial) experienced a 15% volume increase in the second half of FY24 compared to the first half, with full-year volumes up by 4%.
- The company achieved its first 1,000-ton quarter in several years during the fourth quarter.
- Victrex PLC (VTXPF) maintained robust average selling prices (ASP) despite challenges in the chemical industry and medical destocking.
- The company reported strong cash conversion of 114% for the year, with inventory unwinding according to plan.
- Victrex PLC (VTXPF) has completed its major investment phase, leading to significantly lower capital expenditures in the coming years.
Negative Points
- Medical destocking continued to impact Victrex PLC (VTXPF), resulting in a 19% decline in medical revenue.
- Profitability was significantly affected by lower asset utilization and medical destocking, leading to a 26% decrease in underlying profit before tax.
- The company faced a 680 basis point decline in gross margin, primarily due to lower asset utilization and inventory cost impacts.
- Victrex PLC (VTXPF) reported a higher effective tax rate of 32.5%, influenced by non-tax deductible impairments and lower patent box eligibility.
- Currency fluctuations posed a challenge, with an anticipated GBP7 million to GBP8 million adverse impact on PBT for FY25.
Q & A Highlights
Q: Can you provide more details on the medical destocking impact and when you expect recovery?
A: Jakob Sigurdsson, CEO: Medical destocking has significantly impacted our revenue, with medical down 19% year-on-year. We anticipate recovery in FY25 as demand normalizes, supported by increasing surgery rates and industry forecasts predicting a 7% revenue CAGR for medical device companies through 2030.
Q: How has the company's financial position improved, and what are the expectations for CapEx?
A: Ian Melling, CFO: We have a strong financial position with a cash conversion of 114% and have fully paid up our RCF facility. We are entering a period of significantly lower CapEx, having completed most foundational investments, which will support improved cash flow and potential shareholder returns.
Q: What are the key drivers for margin improvement in FY25?
A: Jakob Sigurdsson, CEO: Margin improvement will be driven by better asset utilization, easing raw material costs, and recovery in medical mix post-destocking. Additionally, our new China facility will reduce its current margin drag as it ramps up production.
Q: Can you elaborate on the impact of currency movements on your financials?
A: Ian Melling, CFO: We experienced a GBP4.4 million tailwind at PBT level in FY24 due to favorable hedging impacts. However, for FY25, we anticipate a GBP7 million to GBP8 million adverse impact due to sterling strengthening and the absence of previous forward contract benefits.
Q: What is the outlook for volume growth and key markets in FY25?
A: Jakob Sigurdsson, CEO: We expect at least mid-single-digit volume growth in FY25, supported by robust demand in sustainable solutions and anticipated recovery in medical. Electronics and VARs have shown recent improvements, and we foresee continued growth in these areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
